Conducting business in Bangladesh presents notable obstacles, with corruption as a foremost challenge.
Ranked 147th out of 180 countries on the 2023 Corruption Perceptions Index by Transparency International, corruption is deeply embedded within government and regulatory bodies.
Bribery and favouritism, especially in sectors such as public procurement and law enforcement, inflate costs, slow decision-making, and undermine fair competition.
Consequently, businesses are compelled to allocate additional resources to navigate unethical practices, hindering growth, innovation, and equitable market access.
Consistent poor rankings in the World Bank’s Doing Business report further illustrate the impact of corruption, particularly in areas such as property registration, construction permits, and contract enforcement.
Bureaucratic inefficiencies exacerbate these challenges, significantly affecting the business landscape.
Establishing and operating a business in Bangladesh often requires navigating cumbersome licensing and permit procedures.
The World Bank ranks Bangladesh 168th for starting a business, with entrepreneurs spending nearly double the regional average time to complete essential registrations and approvals. Such delays pose substantial operational challenges and deter potential investors.
Introducing e-governance systems to streamline processes, along with single-window solutions for permits and approvals, could alleviate bureaucratic burdens, benefiting businesses.
Political instability poses additional disruptions.
Frequent strikes, or "hartals," and political protests contribute to a volatile environment. In 2013, for instance, political unrest resulted in a 3.5% decline in GDP growth.
Strikes often lead to property damage, productivity losses, and heightened uncertainty, deterring both domestic and foreign investors.
While contingency planning and alternative supply chains offer partial risk mitigation, achieving sustained investment and stability necessitates fostering political stability and encouraging peaceful discourse.
Infrastructure deficiencies, including weaknesses in transportation, energy, and telecommunications, further hinder business operations.
Bangladesh's logistics infrastructure suffers from congested roads, port bottlenecks, frequent power outages, and limited access to high-speed internet.
The World Economic Forum’s Global Competitiveness Report ranks Bangladesh poorly in terms of infrastructure quality, with logistics costs consuming over 15% of total production costs, impeding competitiveness.
Investment in infrastructure, particularly through public-private partnerships (PPPs), could alleviate these bottlenecks and spur business growth, while extending resources beyond major cities and ports is essential to enhance logistics efficiency.
Labour issues present yet another barrier.
Although Bangladesh boasts a large workforce, skill shortages and inadequate labour standards enforcement persist.
Poor conditions and low wages often result in high employee turnover and reduced productivity. In the Ready-Made Garment (RMG) sector, which accounts for over 80% of exports, safety standards have improved following the 2013 Rana Plaza collapse, yet gaps remain.
Enforcing labour laws and investing in vocational training would foster a more skilled and stable workforce, enhancing productivity for businesses and improving worker welfare.
Access to affordable finance remains a critical issue, particularly for small and medium-sized enterprises (SMEs).
High commercial lending rates, averaging 9-10%, and stringent collateral requirements limit SME financing.
In rural areas, where formal banking infrastructure is limited, businesses often rely on costly informal loans.
Recent progress in digital banking and microfinance initiatives has broadened financial access, but reducing interest rates and easing collateral requirements further could stimulate SME growth and bolster entrepreneurship.
Complex trade regulations and barriers present further challenges to international trade.
Lengthy customs procedures, taking approximately 168 hours to export and 216 hours to import, and high tariffs raise costs and hamper the global competitiveness of Bangladeshi businesses.
Simplifying customs processes, adopting international standards, and expanding free trade agreements would enhance trade efficiency and attract foreign investment.
Strategies for building a better business environment
To cultivate a more favourable business environment, both policymakers and the private sector must collaborate on several fronts:
- Strengthening Governance and Transparency: Enforcing anti-corruption measures and implementing transparency-driven reforms are crucial. Technological solutions, such as digital portals for licensing and permits, can reduce human intervention and mitigate opportunities for corruption. Periodic audits and awareness campaigns can further discourage corrupt practices.
- Investing in Digitalisation and E-Government: Expanding digital government services can enhance efficiency, reduce bureaucratic delays, and lower operational costs for businesses. Comprehensive e-services across government departments would accelerate approvals and minimise in-person interactions.
- Enhancing Infrastructure Development Through Public-Private Partnerships (PPPs): Collaborating with private sector partners can improve transportation, energy, and telecommunications infrastructure, boosting overall business competitiveness.
- Implementing Political Risk Insurance for Foreign Investors: Providing political risk insurance would reassure investors, safeguarding their interests against political instability and making Bangladesh a more attractive investment destination.
- Prioritising Labour Training and Welfare: Government-backed vocational training initiatives, developed in partnership with industry leaders, could bridge the skills gap. Enhanced labour conditions and enforcement of existing laws would foster a stable, productive workforce.
- Expanding Financial Inclusion and Reducing Loan Requirements: Encouraging financial institutions to offer SME-friendly loans with reduced interest rates and simplified collateral requirements, along with expanding digital banking, would improve financial access, particularly in rural areas.
- Reducing Trade Barriers and Improving Customs Processes: Simplifying customs regulations and aligning with global best practices would facilitate trade. Regional trade agreements could further streamline cross-border transactions.
Despite its economic potential, Bangladesh must overcome entrenched challenges to create a thriving business environment.
Addressing corruption, bureaucracy, political instability, infrastructure deficits, labour issues, limited financial access, and trade barriers requires a collective effort from the government, private sector, and international allies.
By focusing on governance, infrastructure, labour development, financial inclusion, and trade, Bangladesh can attract greater investment, drive economic growth, and enhance the well-being of its citizens.
